Japan to unveil huge stimulus package

TOKYO: Japan planned to unveil a huge new stimulus package as early as today to shore up the world’s second biggest economy, whose fragile recovery is threatened by a strong yen and deflation.The Nikkei business daily and Kyodo news agency, citing unnamed officials, said the package would be worth ¥24 trillion (US$272 billion), of which ¥7.1 trillion  (US$80.5 billion) would be actual spending.

The remainder would include loan guarantees and other measures that do not necessarily represent government outlays.

Prime Minister Yukio Hatoyama has warned of the risk of a double-dip recession as the yen’s recent rapid rise and deflation threaten Japan’s feeble recovery from its worst postwar recession.

The yen, after hitting a 14-year high of 84.82 to the dollar a week ago, was back down to around 88 to the dollar yesterday, while the Nikkei stock index topped 10,000 points for the first time in five weeks.

A strong yen makes the country’s exports less competitive.

Earlier this week the central bank said it would inject more than US$100 billion into financial markets through cheap loans in an effort to boost liquidity.  The government yesterday said it hoped to finalise the new stimulus spending in a special cabinet meeting later in the day.

“We want to decide on it hopefully today, as we have been saying it will come this week,” said the top government spokesman Hirofumi Hirano.

The package would fund an eco-point reward programme for energy-efficient appliances, extended loan guarantees for small and mid-size businesses and spending to help recession-hit companies retain workers, the Nikkei said.

The new package will be financed by a second supplementary budget for the current fiscal year that ends in March.

The centre-left Hatoyama government, which ousted a long-ruling conservative party in a landslide election in August, froze part of their predecessors’ first supplementary budget, which was worth ¥13.9 trillion.

It cited the need to slash government waste in Japan, where public debt is around 180 per cent of gross domestic product, largely due to massive spending during the economic “lost decade” of the 1990s.

The Nikkei said the government would promise not to issue new bonds to finance the package except to cover tax revenue declines.

Japan’s economy grew 4.8 per cent on an annualised basis in the July-September quarter, the fastest growth in two and a half years, according to preliminary data from the finance ministry released last month. — AFP

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